Financial Calculator: Tutorial 1 - Fundamentals

Version: Beta 0.2 (September 27, 1996)

A financial calculator helps assess the value of money at different points in time according to a variety of cash flow situations (cash flows are movements of cash, ie money you give or money you receive).

Select the type of computation sought: , then click on .

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Meanwhile, we developed a Microsoft Excel version of this tool.

The most important principle to remember is:
What you PAY is NEGATIVE, what you RECEIVE is POSITIVE.

Four of five basic data need to be entered (the fifth being the information you're looking for):

1) The Present Value.
The Present Value is a sum you receive or pay at the beginning of a timeline.

For instance:
a) You invest $ 1,000 in a savings account: enter -1000 in the field on your right.
b) You borrow $ 1,000: enter 1000 in the field on your right.

2) The periodic payment.
The Payment is a sum you periodically receive or pay.

For instance:
a) You save $ 50 each month that you put on your savings account: enter -50 on your right.
b) Each month, you pay $ 50 to reimburse the loan with the interest: enter -50 in the field on your right.

3) The Yield.
The Yield is the rate of interest you earn on an investment, or pay on a loan.

For instance, for both a and b, we will consider a rate of 1% per month. Unless the compounding of interests (see Tutorial 2) is continuous, this rate corresponds to an Annual Percentage Rate of 12%.
Therefore, enter either 1 and select period, or 12 and select APR, on your right.

Period
Year (APR)
4) The Future Value.
The Future Value is a sum you pay at the end of a typical loan or receive at the end of a typical investment.

For instance:
a) For your savings investment, this is the information you are looking for: You want to know how much in savings you have accumulated. Therefore, leave this field blank.
b) You want to repay your loan periodically, with nothing to owe at the end of the loan. Therefore, enter 0 in this field.

5) The Number of Periods.
The Number of Periods is the amount of time the loan or investment lasts, ie the number of times interests are paid on an investment or the number of times payments are made to solve a loan.

For instance:
a) For your savings investment, you want to know how much you will have accumulated after 24 periods (ie, two years with 12 periods per year). Enter 24 in this field.
b) For your loan, you are trying to find out how long it will take to repay it. Therefore, leave this field blank.

Now that four of the five fields are completed, click on to generate the results.

(optional) Currency

RESULT
Future Value
COMMENTS Typical type of data that were input: Typical savings investment.

$ 1,000.00 are invested.
The real Yield is 1.00% per period.
The timeline is 24.00 periods long.
Periodic payments are $ 50.00.
The investment is worth $ 2,618.41.

Disclaimer

We cannot be held responsible for any detrimental consequence or decision based on the use of this tool and others, and urge you to cross-check any conclusion you may infer with other means... including common sense!


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